No Time Like the Present
Sadaaki Numata on why Japan and Canada need to concentrate on closing a free trade deal.
A few weeks before the first round of negotiations for an Economic Partnership Agreement between Canada and Japan began last November, the business sectors of both countries came together in Tokyo to consider the possibilities of such a deal.
The Canadian Chamber of Commerce in Japan, working with Keidanren, the Japan Business Federation, and the Canadian Chamber of Commerce, mobilized high-powered corporate, academic, and industry figures from both Canada and Japan to discuss the EPA. A consensus soon emerged on two points: a) the larger Asian free trade talks, the Trans-Pacific Partnership (TPP), would entail many challenges, and b) that a free trade deal between Canada and Japan could be negotiated quickly, perhaps within a year, given the “complimentary” nature of the two economies.
Canada is now a party to the TPP negotiations. Following the decision last March by Prime Minister Shinzo Abe, Japan is also expected to be at the negotiating table in three months.
Asia is the world’s growth region. It’s economy is projected to expand from $20.8 trillion in 2011 to $30.3 trillion by 2016. That would be twice the size of the American economy, according to IMF projections. Indeed, half the global economy’s world growth over this period, from a projected $70 trillion to $91 trillion, will be in Asia.
Japan’s economy is twice the size of the existing TPP members combined, excluding the U.S. The foreign subsidiaries of Japanese companies employ more than a million people and are vital to the technology upgrading of most of the Asian countries. As a result, Japan will be a significant player in the TPP.
With Japan in, the TPP negotiations will involve 12 countries, and will be highly complex, covering some new areas hitherto unaddressed by bilateral or multilateral free trade agreements. As such, it may not be possible to achieve the stated goal of concluding the negotiations by the end of 2013.
And the TPP is just one trade deal among many currently being negotiated. In addition to the EPA with Canada, Japan is currently negotiating trade deals with Australia, the EU, China and Korea, Colombia, and Mongolia. Canada has ongoing FTA negotiations with the EU, Korea, India, Morocco, and other countries.
Amid this plethora of deals, the Canada-Japan EPA deserves to be given high priority by both governments. We need to translate into reality the advantage we share of two complimentary economies with extensive experience with bilateral agreements.
At the November symposium in Tokyo, Perrin Beatty, the president of the Canadian Chamber of Commerce, warned against letting the bilateral trade relationship slip from comfort into complacency. As he put it, Japan and Canada “are like old friends sitting together on a park bench.” But while the two countries sit and watch the world go by, “others have been running.” Japan is becoming an aggressive exporter in new sectors like fashion, health products, and industrial design and it is 10 years ahead of the rest of the world in new areas like LED lighting or mobile phone payment systems. While Japan is transforming global supply chains, in part based on ocean-based shipping, Canada has the opportuntity to become a North American gateway for container flows from both Europe and Asia. The Canada-Japan EPA would be a clear signal to link transportation, logistics, and trade flows.
What Canada and Japan need is for their less adaptable corporate giants to be challenged by global competition. The common message repeated by speakers from diverse sectors at the Tokyo symposium was that the two countries share deeply complimentary economic interests, a commitment to market values and democratic government, and support for the principles of an open, global trading system. Indeed, Professor Yorizumi Watanabe from Keio University suggested that a Japan-Canada EPA would be an important step in increasing the connectivity and trade integration between East Asia and North America, with the benefits flowing across the existing network of trade agreements to the entire Asia-Pacific region.
At the Tokyo symposium, speakers on both sides focused on the opportunities available for the two economies.
David Worts, executive director of the Japan Automobile Manufacturers Association of Canada, called an EPA a chance to even the playing field with European and South Korean automakers. “We’re really playing catch-up with South Korea and the EU with regards to free trade deals,” Worts emphasized.
In the wake of the Fukushima disaster, Japan has been searching for a new energy supply mix. This has raised Canada’s profile as a reliable supplier of raw and processed energy such as natural gas. Shinji Fujino of the Japan Oil, Gas and Metals National Corp. explained how the company’s gas development projects in Western Canada are an important step towards the diversification of Japan’s energy supply.
Canada is also a reliable supplier of foodstuffs such as pork, canola, and wheat to Japan. Canadian Federation of Agriculture President Ron Bonnett said that Canada was prepared to “help Japan meet its food security needs.” Hirofumi Kobayashi, manager of the Agricultural Policy Division of the Central Union of Agricultural Co-operatives (JA-Zenchu), indicated support for a FTA agreement, but only if certain measures to protect Japanese producers were included, given that Japan already has to import about 61 per cent of its food. He argued that the protection of domestic farmers from cheaper foreign imports is “a vital link in Japan’s food security.”
The industry and business leaders attending the Tokyo symposium came away convinced of the potential two-way benefits of these complimentary economies and they were optimistic a deal would be done, perhaps within a year if both governments placed real priority on getting the negotiations completed. It is important to follow up on this momentum with a sense of urgency. With the plethora of bilateral and multilateral negotiaitons occupying Japan and Canada respectively, it is vitally important for the two governments to focus on the Japan-Canada EPA, which is not about trying to resolve insoluble differences but about translating what is already a “comfortabe” relationship into a more durable and mutually beneficial one. This should be achievable, with determination on both sides, in the course of this year.
On April 25, the Canadian Chamber of Commerce, in partnership with the CCCJ and Keidanren, is hosting a second round of symposium to help pave the way for an ambitious and balanced agreement, one that will lead to stronger, more formalized trade relations between Canada and Japan.